What it is
Every business needs a place to work and tools to work with. For a bank that is buildings, branch fit-outs, ATMs, computers and vehicles.
These are shown at what they cost minus depreciation. Depreciation is the yearly charge that spreads the cost over the asset's life.
For a bank this is a small line. A bank's real assets are its loans, not its buildings.
How it is calculated
Cost of fixed assets − accumulated depreciation. Right-of-use assets from leases may be included under NFRS 16.
Worked on Nabil Bank Limited, FY 2082/83 Q4
NABIL's property, plant and equipment was Rs 442.05 crore at the end of FY 2082/83 Q4, a small part of total assets of Rs 73,473.16 crore.
What good looks like
Usually under a few percent of total assets. A jump often means a new head office or a merger. It matters for costs (depreciation hits operating expenses), not for safety.
Watch out
- Land is not depreciated; its book value can be far below today's market price.
- A big new building raises operating expenses for years.
- After a merger this line often jumps as two branch networks combine.
In Nepal
No NRB ratio is built on this line. Nepali banks report it under NFRS; revaluation of land, if done, goes to a revaluation reserve inside other reserves.
Questions
Only a little. Buildings are hard to sell fast. Safety comes from capital and loan quality.
It is a yearly cost that lowers profit. A bank with many new branches carries more depreciation for years.